Insurers disagree with PenCom on custody of N145bn Annuity Fund
By Abdul Olalekan
The recent circular issued by the National Pension Commission (PenCom) mandating life insurance companies to transfer about N145.05 billion Annuity Fund in their possession to Pension Fund Custodians (PFCs) is generating controversy between insurance and pension sectors, Business 247 News Online, has learnt.
Investigation shows that the insurance industry regulator and operators are unhappy with the pension industry regulator, as this directive is expected to starve the affected life firms of fund.
The circular, which was sent on November 3, 2016, is currently unsettling the life insurers, as they were reluctant to release the fund to pension fund custodians.
As it stands, there is an embargo placed on new annuity businesses, until insurers transfer the annuity fund in their possession to pension custodians.
Already, there is a serious de-marketing of Annuity Option by some overzealous Pension Fund Administrators (PFAs), with some life insurers equally doing same on Programmed Withdrawal option.
To this end, some of the affected life insurers, who are feeling disgruntled by this issue felt this development will only tilt in favour of the PFAs.
The concerned insurers, Business 247 News Online learnt, had alerted the insurance industry’s regulator, the National Insurance Commission (NAICOM) this week, even as the Nigerian Insurers Association (NIA) is closely discussing and working with the regulatory authority to resolve this issue amicably.
Currently, NAICOM is planning a meeting with PenCom to iron out the issue as the regulator felt PenCom ought to have earlier discussed the matter with it before sending out circular to the industry.
Speaking exclusively to Business 247 News Online Friday, the Director General, NIA, Mr. Sunday Thomas, said the body was not sitting idle on a matter that is as serious as that, noting that the body is currently in discussion with the regulator to resolve the matter as quickly as possible.
“Of course, we are liaising with our regulator (NAICOM) and we are aware that the regulator is also trying to do something about that,” he stressed.
Giving reasons why it has to take away the annuity fund from the insurance industry, PenCom alleged that some insurance operators were allowing retirees to use their annuity fund as collateral for loans, which, according to it, negates the pension law.
PenCom said its decision will ensure that all pension funds are kept in the custody of the Pension Fund Custodians as specified by law, hence, guiding against unethical practices that the fund is being used for by some life insurers.
One of the PFAs (ARMS Pension) sent a message to its numerous clients affirming the PenCom directive was done in a bid to ensure consistency with the PRA 2014 and to strengthen the administration of retirement benefits.
The PFA quoted the PenCom circular that henceforth, “The custody of retiree life annuity be domiciled with Pension Fund Custodian (PFC) ; All Life Insurance companies currently providing retiree life annuity for retires are to open operational accounts jointly with a PFC and transfer the corresponding pension assets in their custody to the PFC of their choice within three months. The approval of new annuity requests is hereby put on hold with immediate effect until Life Insurance Companies meet the custody and transfer conditions.”
